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The 2007 CSR : A Challenging Spending Review

The 2007 CSR : A Challenging Spending Review. Carl Emmerson Institute for Fiscal Studies 20 February 2007. Main points. Fiscal tightening projected by Treasury taxes to rise and spending to fall as a share of national income A Challenging Spending Review

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The 2007 CSR : A Challenging Spending Review

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  1. The 2007 CSR : A Challenging Spending Review Carl Emmerson Institute for Fiscal Studies 20 February 2007

  2. Main points • Fiscal tightening projected by Treasury • taxes to rise and spending to fall as a share of national income • A Challenging Spending Review • some tight allocations already made • apparent trade-off between schools, hospitals and child poverty • Plans could be topped up in future • but would require additional finance, which would be likely to mean further tax increases

  3. Forecast fiscal tightening Source: HM Treasury

  4. Total Managed Expenditure Source: HM Treasury

  5. Total Managed Expenditure Source: HM Treasury

  6. A challenging spending review?

  7. A challenging spending review?

  8. A challenging spending review?

  9. How has spending increased? Source: HM Treasury Note: Average annual increase 1996–97 to 2007–08

  10. Known allocations • Home Office • real freeze • Cabinet Office, HM Treasury, HM Revenue & Customs, administrative part of DWP • cut of 5% per year in real terms • Department for Constitutional Affairs • cut of 3½ per year in real terms • 5 smaller departments • cut of 5% per year in real terms

  11. The difficult trade off? • Education spending • Child poverty • Health spending

  12. School spending “Our long-term aim should be to ensure for 100 per cent of our children the educational support now available to just 10 per cent” Source: HM Treasury

  13. School spending Private spend = £8,000 Source: DfES

  14. School spending • 2007 CSR cannot meet this target • To meet in 2010–11 : £2,330 per pupil * 7.2m pupils ≈ £17bn • Were pupil numbers to remain constant : 14 years at 2½% p.a. 7 years at 5% p.a. • Gap not closed if private spending increases • current state spending at 1996–97 private levels

  15. 2010 Cost = £4½bn to £13bn p.a. depending on targeting Child poverty in 2010 and 2020 Source: Brewer, Browne and Sutherland (2006)

  16. Health spending Source: OECD

  17. Health spending NHS spending under Labour Source: HM Treasury

  18. Wanless review Fully engaged scenario: “levels of public engagement in relation to their health are high: life expectancy increases go beyond current forecasts, health status improves dramatically and people are confident in the health system and demand high quality care. The health service is responsive with high rates of technology uptake, particularly in relation to disease prevention. Use of resources is more efficient.” Source: HM Treasury

  19. Health spending NHS spending under Labour Source: HM Treasury

  20. Unweighted Weighted Health spending EU total health spending, 2003 Source: OECD; IFS

  21. Unweighted Weighted Health spending EU total health spending, 2003 Source: OECD; IFS

  22. Unweighted Weighted Health spending EU total health spending, 2003 Source: OECD; IFS

  23. What increases might we have? 9 smaller departments Department for Constitutional Affairs Source: HM Treasury ; IFS

  24. What increases might we have? 9 smaller departments Department for Constitutional Affairs Source: HM Treasury ; IFS

  25. A trade-off between health and education?

  26. A trade-off between health and education? Labour to date

  27. A trade-off between health and education? Wanless recommendation = 4.4% Labour to date

  28. A trade-off between health and education? Wanless recommendation = 4.4% Labour to date Expected growth in national income = 2½%

  29. A trade-off between health and education? Wanless recommendation = 4.4% Labour to date Expected growth in national income = 2½%

  30. A ‘firm and fixed’ CSR? Average increases from April 1999 to March 2002 Source: HM Treasury; Department of Health; IFS

  31. Conclusions • A Challenging Spending Review • some tight allocations already made • apparent trade-off between schools, hospitals and child poverty • Plans could be topped up in future • this is what happened under previous (July 1998) Comprehensive Spending Review • but would require additional finance, which would be likely to mean further tax increases

  32. The 2007 CSR : A Challenging Spending Review Carl Emmerson

  33. The 2007 CSR : A Challenging Spending Review Carl Emmerson Institute for Fiscal Studies 20 February 2007

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